Applied Digital's Revenue Jumps 322% to $341.9 Million, but GAAP Loss Widens to $221 Million on Financing Charges

Applied Digital Corporation reported fiscal first-quarter 2027 revenue of $341.9 million, up 322% from the prior-year period, even as the company posted a net loss from continuing operations attributable to common stockholders of $221.0 million, or $0.76 per share, compared with an $18.5 million loss a year earlier, according to the company's press release. On a non-GAAP basis the picture looked far healthier: adjusted EBITDA reached $64.4 million versus $0.5 million a year earlier, and the adjusted net loss was a comparatively modest $4.1 million.

Revenue Mix Still Leans on Construction Work

The bulk of the top-line growth came from the company's HPC Hosting segment, which generated $262.6 million of revenue and $33.4 million of segment operating profit. Within that figure, $183.5 million was tied to tenant fit-out services, a non-recurring construction-related revenue line, while base rent contributed $65.8 million and tenant recoveries added $13.3 million. The legacy Data Center Hosting business, largely tied to crypto-mining infrastructure, was essentially flat at $37.8 million of revenue versus $37.9 million a year earlier, but still delivered $13.3 million of segment operating profit.

Why the GAAP Loss Widened Despite Positive Adjusted EBITDA

The gap between a positive adjusted EBITDA of $64.4 million and a $221.0 million GAAP loss was driven primarily by financing and fair-value items rather than depreciation. Interest expense rose 866% year over year, from $8.0 million to $77.4 million, which the company attributed to "an increase in debt arrangements between the periods." That was only partly offset by a jump in interest income to $35.8 million from $0.9 million, reflecting cash held in interest-bearing accounts.

Two non-cash fair-value items added further to the loss. Applied Digital recorded a $49.5 million loss on the change in fair value of derivatives, which it said was due to a $56.1 million decrease in the fair value of its Babcock & Wilcox Enterprises (B&W) common stock warrant, partly offset by a $6.6 million increase in derivative assets tied to preferred and common units held by a noncontrolling interest. A separate $11.4 million loss on change in fair value of investment reflected a decline in the fair value of the company's B&W common stock holding.

Operating expenses also climbed sharply: selling, general and administrative expense rose 289% to $114.7 million, which the company said was driven primarily by a $51.7 million increase in stock-based compensation tied to performance awards and headcount growth, along with $9.9 million in additional personnel costs and $12.1 million in professional service fees for legal work on transactions and projects. The company separately disclosed a $16.1 million net loss from discontinued operations for the quarter, a figure outside the $221.0 million continuing-operations loss attributable to common stockholders.

Balance Sheet: Heavy Debt Load Against a Large Cash Position

As of August 31, 2026, Applied Digital held $3.7 billion in cash, cash equivalents and restricted cash against $6.4 billion in debt. The release did not break out how much of that cash balance is restricted versus freely available. The only debt tranche with disclosed pricing and maturity terms was $1.59 billion of 7.000% Senior Secured Notes due 2031, issued at par through subsidiary APLD ComputeCo 3 LLC to fund construction of the third HPC building (150 MW) at Polaris Forge 1 and to repay a $300 million bridge facility. Terms on the remainder of the $6.4 billion in debt were not disclosed in the release.

Polaris Forge 1 Reaches 250 MW as Lease Backlog Grows

Polaris Forge 1's first 100 MW building became operational in October 2025, and its second 150 MW building was delivered in two 75 MW phases, the first on July 1, 2026 and the second on October 1, 2026, after quarter end, bringing live capacity at the campus to 250 MW. A third 150 MW building is under construction. Management said it expects initial operations at Polaris Forge 2 in Harwood to lift delivered critical IT load across its North Dakota campuses to 300 MW by the end of calendar 2026.

As of August 31, 2026, the company had leases covering approximately 1.41 GW of critical IT load across five campuses: Polaris Forge 1, 2 and 3 in North Dakota, Delta Forge 1 in Louisiana, and Delta Forge 2 in Alabama. Those leases represent approximately $36 billion of contracted revenue over their initial base terms, or roughly $86 billion if all renewal options are exercised. Polaris Forge 1 is leased to CoreWeave, Polaris Forge 2 to an investment-grade hyperscaler, and Delta Forge 1, Polaris Forge 3 and Delta Forge 2 to a tier-one investment-grade hyperscaler. A 210 MW, 15-year lease at Delta Forge 2 with that tier-one hyperscaler customer, announced June 8, 2026, represents approximately $5.2 billion of base-term contracted revenue on its own.

Expansion and Funding Needs Beyond the Quarter

The $1.59 billion notes offering covers construction of the third Polaris Forge 1 building, but the release did not specify a complete funding plan for the remaining projects under construction, including Polaris Forge 2 and 3 and Delta Forge 1 and 2. Applied Digital's own risk disclosures flag this as an open question, citing dependence on "our ability to raise additional capital to fund the ongoing datacenter construction and operations" and "our ability to obtain financing of datacenter leases on acceptable financing terms, or at all."

After the quarter closed, the company said it secured up to approximately 1 GW of potential power capacity in Finland, which it described as establishing a strategic foothold in an emerging European AI market, and signed a power purchase agreement with Base Electron for capacity and energy from an approximately 1,200 MW natural gas-fired plant to be developed in North Dakota. Applied Digital holds an approximately 10% equity interest in Base Electron, an independent power producer that the company said is developing front-of-the-meter generation that could add multiple gigawatts of new power in the Dakotas over time.

Market Reaction

Seeking Alpha reported that Applied Digital shares fell 1.5% on Thursday despite the earnings beat, while Wall Street analysts remained constructive on the company's data center growth prospects. The outlet did not detail specific rating or estimate changes beyond that characterization.

Bottom Line

Applied Digital's quarter shows a business scaling quickly on both the construction and leasing fronts, with 250 MW now live at Polaris Forge 1 and a lease backlog the company values at up to $86 billion including renewals. But the GAAP loss underscores that the scale-up is being financed with rapidly rising debt costs and non-cash fair-value swings tied to its B&W equity stake, while the company's own disclosures acknowledge that funding for projects beyond the recently priced notes is not yet fully secured.